Some of the market barriers identified in the 1995 IOM report were confirmed through the interviews with private firms and case studies conducted for this effort. Figure 36 summarizes the market barriers that were confirmed (in full or in part) and not confirmed during this study. (As noted above, the number of interviews and case studies was limited by the scope of this study.) Although no new general types of market barriers were identified during this project, certain ones were elaborated or described in a more contemporary context.

Figure 36: Perceived Market Barriers in 1995 IOM Report

Market Barrier from IOM Report

Confirmed

Not Confirmed

Notes

Uncertain market environment

✓

Discovery

Limited number of researchers focusing on drug abuse

✓

Lack of well-characterized animal models of cocaine addiction

✓

Limited basic science knowledge of addiction, craving, and relapse

✓

File IND

Clinical Studies

DEA regulations

✓

Complications of concomitant illness and polydrug abuse

✓

Patient population perceived as difficult to study

✓

Efficacy outcomes difficult to define or measure

✓

Few clinical investigators

✓

File NDA

Length of FDA approval process

✓

Other Approval

State rescheduling

✓

Varied state / local approval processes

✓

DEA review time

✓

Marketing

Varied state and local regulations

✓

Lack of traditional marketing to physicians

✓

Pricing clause in DHHS CRADAs

✓

NIH recently removed reasonable pricing clause from CRADAs

Small foreign market

✓

Treatment System

Limited number of narcotic treatment programs

✓

Stigma of drug-abuse

✓

Bias by some treatment providers against pharmacologic treatments

✓

Varied state / local treatment regulations and financing mechanisms

✓

Uncertain treatment financing

✓

Adapted from: IOM, Development of Medications for the Treatment of Opiate and Cocaine Addictions, 1995.

Two types of market barriers emerged from our report. Critical barriers are those that must be surmounted in order for pharmaceutical firms to regard as feasible the prospects for developing cocaine addiction medications that will be financially successful. Non-critical market barriers are those that, if lowered or eliminated, may enhance (though perhaps only marginally) the financial outlook for developing cocaine addiction medications only if the critical barriers are also lowered. That is, without lowering the critical barriers, lowering the non-critical ones would be unlikely to transform an unattractive market into an attractive one.

Among the diverse market barriers perceived by the industry, three emerged as critical in this study, i.e., that would have to be lowered or eliminated in order to begin to make new drug development attractive to pharmaceutical companies:

Small and uncertain market for cocaine addiction and abuse pharmacotherapy

A substance abuse treatment system that limits access to this market

Limited and uncertain payment for treatment

The beginning of the following section briefly describes private industry's views on the strength and importance of these three critical market barriers. The remainder of the section describes non-critical market barriers relative to the process of drug development and marketing.

The small size and uncertainty of the market for cocaine pharmacotherapies constitutes a critical barrier to development of a cocaine abuse pharmacotherapy. Although all of our interviewees agreed that the total number of cocaine users is large, they recognized that the market for a cocaine abuse treatment is likely to be much smaller than the absolute number of people that use cocaine. Representatives of one pharmaceutical company said that they used a conservative estimate of the market size for cocaine treatment that was about half of the generally accepted 2 million heavy users.

Uncertain market penetration was another reason for the skepticism of the market. Interviewees from two of the companies stressed that potential patient compliance problems and limited access to patients (i.e., given the need for many substance abusers to obtain pharmacotherapy under controlled settings) made them uncertain about the true market size for cocaine treatment. Representatives of two pharmaceutical companies noted that many publicly-funded treatment centers were managed by non-physicians who tended to oppose the use of drugs to treat substance abuse, which such staff regarded as "behavioral" conditions, thereby further restricting the potential sale of these drugs.

There was consensus among the pharmaceutical company representatives that the current substance abuse treatment system constitutes a great market barrier that severely limits opportunities for market penetration.

As reported in the case studies, sales of LAAM and naltrexone were restricted by the limited number of heroin and alcohol treatment programs and the limited capacity of these programs. Twenty-five percent of opiate addicts receive treatment from the methadone maintenance programs while less than 1 percent of people in the U.S. afflicted by alcohol abuse and dependence are in alcohol treatment centers. LAAM is restricted to maintenance programs as required by The Narcotic Addict Treatment Act of 1974. Distribution of naltrexone is limited to comprehensive treatment centers, which enhance patient compliance. These market restrictions severely limit sales of the drugs and create another barrier to pharmaceutical companies that are considering developing a pharmacotherapy for drug addiction. One major market advantage of Nicorette is that, with an over-the-counter formulation, patients do not need to visit a treatment center or a provider to obtain treatment, vastly expanding market potential.

The lack of medical treatment models is another shortcoming of the substance abuse treatment system that poses a major concern for pharmaceutical companies. The pharmaceutical company executives cited an "anti-medication" climate among publicly-funded treatment center staff that would severely limit sales of pharmacotherapies through treatment centers. Interviewees implicated the large number of non-physicians (a.k.a. "non-prescribers") as the main reason for the anti-medication sentiment at these treatment centers.

Our market analysis supports the finding that there is a large number of non-physicians at publicly-funded treatment centers. The 1991 NDATUS study of specialty substance abuse providers surveyed 9,000 treatment centers and found that there were only about 2.2 full-time equivalent psychiatrists and other physicians, respectively, per 1,000 enrolled patients (Office of Applied Studies, 1993). The most recent surveys that have examined staffing patterns confirm that the substance abuse treatment system involves little or no physician time in the treatment of patients.

For example, methadone treatment for heroin addiction would appear to be the most medically oriented model of drug treatment. However, the role of physicians in methadone clinics is generally small and circumscribed to initial diagnostic assessments (i.e., of heroin addiction), management of methadone dosage, and some primary health care services. Most clinic services are oriented to the behavioral and psychosocial needs of the patients, and are delivered by counselors, social workers, and, less often, psychologists (Institute of Medicine, 1990).

This sentiment was repeated in our LAAM and naltrexone (Trexan) case studies, which found that a major market barrier for both products has been that treatment decisions and funding for heroin addiction are often controlled by state-level substance abuse program administrators who often do not have clinical backgrounds.

Another critical market barrier is the uncertainty surrounding the reimbursement of cocaine abuse and addiction treatment. The pharmaceutical company respondents, as well as one from a VC firm, voiced their concern over the heavy reliance of the substance abuse market on federal and state government reimbursement. The perception among the drug companies is that many cocaine addicts do not have private insurance and rely on Medicaid for treatment, and that only a portion of those individuals with private insurance use their benefits for drug abuse treatment. This perception is consistent with the 1995 TEDS data (described earlier in report) that found over 68 percent of enrolled cocaine abusers had no health insurance, and an additional 17 percent had Medicaid coverage. One pharmaceutical company noted that substance abuse services continue to be subsumed under mental health benefits of entitlement programs, and that the overall budget for mental health services continues to shrink in light of other competing health priorities.

Reimbursement was an issue for LAAM, naltrexone, and clozapine. Treatment for heroin addiction (e.g., LAAM and naltrexone) has been funded primarily through federal and state budgets, making reimbursement difficult for pharmaceutical companies. In the case of clozapine, many public payers (e.g., Veteran's Administration, several state Medicaid agencies) refused to pay the additional cost of purchasing the Clozaril Patient Monitoring System ($9,000) before Sandoz uncoupled the drug and the monitoring system.

As reported in our market analysis, price sensitivity to a cocaine medication is another aspect of payment that may be a critical market barrier because price resistance may limit market size. As no approved pharmacotherapy for cocaine abuse has been tested on the market, it is not possible to know how sensitive the market would be to such a medication. However, indirect available evidence from other substance abuse medications (e.g., LAAM, naltrexone) and the current nature of cocaine abuse treatment and its financing would appear to indicate that the market would be very sensitive to the price of a cocaine medication. In a market where the average daily treatment cost is a modest $9.00 per outpatient and $23.00 per inpatient, a cocaine pharmacotherapy priced at a daily dose of a few dollars would represent a significant proportionate cost increase. This may be particularly so in the estimation of substance abuse treatment providers that are vested in psychosocial approaches to the exclusion of pharmacotherapy. It is important to note that the price sensitivity of the current treatment system may vary considerably from that of more typical pharmacotherapy markets that involve physician prescribing and distribution through pharmacies.

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